Europe's biggest banks were routed today as Greece's banks shut their doors and Athens prepared for a shock referendum on Sunday which will decide its future in the single currency.

The country's Syriza leadership decided last Friday to put its creditors' proposals - which it has rejected - to the Greek people.

The referendum is seen as a last chance for Greece to stay in the eurozone and European Commission president, Jean-Claude Juncker, has pleaded with the Greek people to vote 'Yes'.

Juncker said: 'No would mean, regardless of the final question, that Greece is saying no to Europe.'

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Desperate: President Jean-Claude Juncker today begged Greece to vote 'Yes' for a bailout on Sunday and stay in the eurozone

He added that he felt 'betrayed' by the failure of Athens to agree on a bailout deal with EU ministers and that the country should not ‘commit suicide’ by voting ‘No’ to the austerity measures in the referendum.

He continued: 'I will ask the Greek people to vote Yes, independently of the question that will finally be submitted for their consideration, the question might change over the coming days.

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'I will say to the Greeks, whom I love deeply - you mustn't commit suicide because you are afraid of death. You must vote Yes, independently of the question asked.'

Other political leaders, including Italy’s prime minister Matteo Renzi and German chancellor Angela Merkel, were desperate to reiterate just how important the vote on Sunday is for the Greek people.

Renzi said that the referendum is a decision between the euro and the drachma, while Merkel also agreed that the vote is a in/out decision on the euro.

All smiles: Italy’s prime minister Matteo Renzi and German chancellor Angela Merkel, were desperate to reiterate just how important the vote on Sunday is for the Greek people

The warnings from Europe's top political leaders comes as investors around the globe panic sold shares following the dramatic events in Greece over the weekend and increasing expectations that the cash-strapped country may leave the eurozone.

The Greek government decided on Sunday night it had no option but to close the nation's banks today, after the European Central Bank froze the liquidity lifeline over the weekend that has kept the cash-strapped country afloat.

Customers woke up this morning to metal shutters across bank entrances and many cash machines as the capital controls came into force.

Panic: The Greek government announced early today that it has decided to keep its banks closed for a whole week until after the referendum on July 5

The banks will remain closed for a whole week until after the referendum on July 5 and withdrawals from ATM machines have been limited to €60 (£40) per day. Foreign transfers out of Greece are prohibited, although online transactions between Greek bank accounts are to continue as normal.

The events have left markets reeling, with London's top flight equity market, the FTSE 100, falling almost 1.7 per cent, or 117.7 points to 6635.7 by late afternoon trading.

In early trade on Wall Street, the blue chip Dow Jones Industrial Average shed 155.1 points at 17,791.6, while the blue chip S&P 500 fell 18.5 points to 2,083.0, and the tech-laden Nasdaq Composite fell 47.40 points to 5,033.1.

In Germany the Dax has fallen 3.2 per cent and in France the CAC 40 is 4.0 per cent lower. The biggest faller is Portugal's PSI Index 20, which has lost 5.6 per cent, or 326.5 points, at 5,508.5.

Overnight in Tokyo the Nikkei index fell almost 3 per cent and in Hong Kong shares slid 2.5 per cent.

Banking stocks have been the hardest hit, with shares in Banco Comercial Portugues down 9.6 per cent, while Banca Popolare Di Sondrio dropped 9.7 per cent and shares in Bank Of Ireland were off 8 per cent.

In the UK, Royal Bank of Scotland shares have fallen 1.7 per cent, or 6.2p, to 357p, Barclays shares are down 1.6 per cent, or 4.5p, to 267.8p and HSBC shares dropped 1.7 per cent, or 10.4p, to 579.5p.

Airlines were also hit the Greek situation and the terror attacks in Tunisia. IAG shares top the FTSE 100 fallers board, down 22.3p at 492.2p, easyJet sheds 46p to 1,531p. Thomas Cook is the biggest FTSE 250 faller, down 7 per cent or 10.2p to 134.0p.

Meanwhile the pound is one cent up against the euro at just under 1.42.

The trouble started on Friday when the Syriza-led government in Athens announced that it would hold a referendum on July 5 on the final bail-out terms offered by the country's creditors.

Then over the weekend Greece failed to come to an agreement in last-ditch talks with its creditors and as a result ECB refused to issue any further emergency loans. But crucially the ECB did announce it would continue an emergency credit line to Greek banks so that customers can continue to withdraw their cash, but could turn off the tap if Greece defaults.

Athens is now likely to miss its a €1.6billion payment to the International Monetary Fund tomorrow - the same day that its current bailout expires - increasing the chances of the country leaving the eurozone altogether.

Referendum - going to the polls: Athens announced that it would hold a referendum on July 5 on the final bail-out terms offered by the country's creditors

Greek prime minister Alexis Tsipras and his Government will recommend that the Greek people vote 'No' in the referendum to be held on Sunday.

Tsipras called the bailout terms put forward by its three creditors - the IMF, the ECB and European Commission - as 'not viable' as a long-term solution for his country.

All eyes now turn to European Commission president Jean-Claude Juncker, who will speak about the Greek situation later this morning.

Shortly afterwards German Chancellor Angela Merkel will be due in the German parliament to discuss the crisis. She also due to hold emergency meetings today with German political party leaders, and her own CDU party.

Waiting game: Banks are closed but pensioners, many of whom usually use banks rather than ATMs, have gathered outside them

IG senior market analyst Chris Beauchamp said: 'Greece's decision to shut banks over the weekend is just the most dramatic element of a crisis that has spiralled out of control.'

Mike van Dulken, head of research at Accendo Markets, added: 'Equity markets nursing chunky losses having gapped lower into the new week on surprise news of a Greek referendum as PM Tsipras passes the buck and asks his 11 million electorate whether it wants to accept or reject what he regards as unacceptable creditor proposals/reforms for release of bailout funds.

'While Greece is sure to miss Tuesday's IMF debt payment, thus falling into arrears and joining an exclusive club, this may be the least of our worries as a rejection vote next Sunday could seal the country's exit from an altogether more important one - the Eurozone single currency - and contagion risk is very real.'

Greek Finance Minister Yanis Varoufakis said on Sunday: 'Capital controls within a monetary union are a contradiction in terms'

Heavy losses for southern European government bonds have also taken place as a wave of contagion from Greece kicks in.

Greek bond yields have soared this morning to more than 14.2 per cent - bond yields move in the opposite direction to bond prices so as the yield, or rate of interest goes higher the price falls.

Italy, Spain and Portugal are all in trouble too. Yields are up by around 35 basis points each.

As expected, investors are seeking safety and pushing down German ten-year bond yields.

Bunds yields are down by 20.7 basis points to 0.7 per cent.

Richard Hunter, at Hargreaves Lansdown, said: 'The IMF deadline tomorrow now looms large, whilst investors will now be looking for any possibility of an eleventh hour rescue to prevent either or both of a Greek default or exit.